2019 Bud­get an­chored on IMF

GOV­ERN­MENT will strictly ad­here to tough re­forms an­nounced in the 2019 Na­tional Bud­get, as it demon­strates to in­ter­na­tional fi­nanciers, par­tic­u­larly the IMF, that it is ready to walk the talk.

The Bud­get speaks to the IMF’s Staff Mon­i­tored Pro­gramme, an in­for­mal and flex­i­ble in­stru­ment for di­a­logue between the lender and a mem­ber coun­try.

Fi­nance and Eco­nomic De­vel­op­ment Min­is­ter Pro­fes­sor Mthuli Ncube pre­sented a “brave” US$8,16 bil­lion Bud­get that speaks to the ob­tain­ing chal­lenges, while also cap­tur­ing the as­pi­ra­tions of eco­nomic trans­for­ma­tion go­ing for­ward.

Some of the bold mea­sures in­clude con­tain­ing the bud­get deficit to sin­gle digit lev­els; aban­don­ing the prac­tice of in­cur­ring ex­tra bud­getary ex­pen­di­ture through Trea­sury Bills; re­duc­ing re­course to Cen­tral Bank lend­ing; and pri­vati­sa­tion of paras­tatals, among oth­ers.

The global en­gage­ment and re-en­gage­ment pro­cesses be­ing steered by Pres­i­dent Em­mer­son Mnan­gagwa’s Gov­ern­ment is un­der­stood to have been a con­sid­er­a­tion in adopt­ing some IMF rec­om­men­da­tions in the Bud­get.

The IMF has ex­pressed con­cern over the huge wage bill, which gob­bles 93 per­cent of rev­enues.

Gov­ern­ment is re­duc­ing this via a five per­cent salary cut for se­nior of­fi­cials right up to the Pres­i­dent, elim­i­nat­ing an es­ti­mated 75 000 ghost work­ers, and strictly im­ple­ment­ing its re­tire­ment pol­icy.

The num­ber of for­eign mis­sions, which in 2018 have spent US$65 mil­lion against a Bud­get al­lo­ca­tion of US$50 mil­lion, is be­ing re­duced.

Re­serve Bank of Zim­babwe Deputy Di­rec­tor for Eco­nomic Re­search Dr Neb­son Mupunga con­firmed last Thurs­day at the sixth an­nual col­lec­tive bar­gain­ing sum­mit in Nyanga that: “The Bud­get is go­ing to be an­chored on the Staff Mon­i­tored Pro­gramme which we are go­ing to en­ter with the IMF.

“That pro­gramme has got strin­gent con­di­tions that we are go­ing to adopt as a coun­try as a way of con­tain­ing in­fla­tion and also as a way of try­ing to solve the fis­cal deficit.

“And one of the com­mit­ments that have been made is ac­tu­ally stop ac­com­mo­da­tion of Gov­ern­ment bud­get deficit by the Cen­tral Bank.”

Gov­ern­ment ex­pen­di­ture is mainly re­spon­si­ble for high money growth in the mar­ket, but ro­bust mea­sures have been de­signed to deal with the deficit.

The two cent tax an­nounced in Octo- ber is one of the mea­sures aimed at ad­dress­ing the deficit.

Dr Mupunga said re­solv­ing Gov­ern­ment ex­pen­di­ture was one of the “ma­jor tar­gets” that Harare would be “judged un­der the SMP”.

“There is com­mit­ment to re­duce ex­pen­di­ture; there is also com­mit­ment to en­sure that there is no re­course to Cen­tral Bank for the fi­nanc­ing of the bud­get deficit,” said Dr Mupunga.

In­fla­tion poser

By the end of Au­gust, pub­lic debt stood at US$17,69 bil­lion. Do­mes­tic debt ac­counted for 54 per­cent of the over­all debt, up from 49 per­cent. Ex­ter­nal debt re­ceded to 46 per­cent from 51 per­cent.

It is highly likely hoped that the pub­lic debt statu­tory limit of 70 per­cent will be breached by end of year.

With year-on-year in­fla­tion also shoot­ing up to 20,85 per­cent in Oc­to­ber driven by a wave of price in­creases, Gov­ern­ment is keen on re­bal­anc­ing the econ­omy.

The RBZ ex­pects year-on-year in­fla­tion to de­cline in 2019 and po­ten­tially end the year on below 10 per­cent.

The IMF 2019 in­fla­tion fore­cast is bet­ter than the RBZ’s at five per­cent.

Dr Mupunga said in­fla­tion is an­tic­i­pated to fall on the back of price de­creases in the ab­sence of sig­nif­i­cant salary in­cre­ments.

“We are go­ing to see most re­tail­ers re­duc­ing the prices be­cause they are be­yond the reach of most peo­ple. So in such a case, we ex­pect in­fla­tion to sig­nif­i­cantly go down next year, and in this case it will be less than 10 per­cent,” said Dr Mupunga.

Fi­nance and Eco­nomic De­vel­op­ment Min­is­ter Pro­fes­sor Mthuli Ncube at Par­lia­ment Build­ing for the 2019 bud­get pre­sen­ta­tion in Harare last week